Why Should I Worry About Legacy & Estate Planning I am Young and/or I Don't Have Many Assets?

Two common excuses for not instituting legacy and estate plans are "I don't have enough assets" and "I am too young to die or become incapacitated." These are misconceptions that can be attributed to a lack of understanding of consequences of failing to plan and a disinclincation to recognize that some day we all transition. No matter what your age or your assets you have learned life lessons and experienced a

unique life story that shaoes and defines your journey. For this reason, we all have a pricesless, one of a kind asset that should be captured and preserved for our next generations. One format that this priceless asset can be manifested in is through the drafting of a Personal Legacy Statement. There are also many reasons why estate planning is particularly important when assets are limited.

Legacy & Estate planning for even modest estates is important because of inflation. This is easily demonstrated through the use of the Rule of 72, which holds tha

t 72 divided by the inflation rate equals the number of years it will take to double the size of an estate. For example, if the inflation rate is 5 percent, the rule says that the value of an estate will double every 14.4 years just because of inflation! An easy way to understand how this happens is to think about how much you paid for your home as compared to the original cost of your parents' homes. Inflation is a certainty of life which will continue to apply even when one chooses to ignore its presence. The Rule of 72 does not account for the possibilite

s of the assets growing in excess of the inflation rate. The point is that the value of your life insurance and your house, along with any other assets that you may have or acquire, can be significant, especially over the time of several generations.

The second reason why Legacy and Estate planning is important is becuase, according to morbidity tables, the chance of your becoming incapacitated or disabled in the next year is significantly higher than your chances of dying during the same time. The absence of a properly implemented plan necessitates a formal legal guardianship and conservatorship proceeding that involves court costs and the expense of an attorney in a process that u

ltimately ties up your assets for a time as well.

In a guardianship and conservativeship preceeding a court will seek to protect the assets of an incapacitated person, so it requires annual accounting reports justifying the use of assets. Depending upon state law, court permission might be required for the sale of major assets. A performance bond might also be required. The cost of guardianship and conservatorship proceedings far exceeds that cost of an proper plan even for young people or those with small estates.

In the abscence of a properly drafted estate plan, state law determines how assets will be distributed at your death. In states where property is generally owned by married couples in the form of tenancy by the entirety or joint tenanc

y with right of survivorship, the jointly held property will pass automatically to the surviving joint tenant by operation of law. This may inadvertently create federal estate tax problems when your spouse dies which could deprive your children and heirs of a portion of their inheritence.

In states where real propert is held by spouses as tenants in common, the absence of a written and properly executed plan results in the assets of the deceased spouse passing to the children, with the surving spouse receiving only a partial share.

If the children are minors, they cannot hold property in their own names and a formal guardianship proceeding is necessary for the court to appoint the surving spouse as the guardian. An expensive performance bond may also be required. Since a parent has the obligation to support the children, courts generally do not premit the parent to use the children's assets for their suppurt unless the parent is destitute. A further complication is that the surviving spouse may be unable to handle the present house payments and desire to sell the home. With the children owning part of the equity of the home and portions of the deceased spouse's other assets, the surviving spouse may not have access to those funds to purchase a new home.

Thus, even though a person is young and has few assets now, the extra cost and lost time and control given up the results of failing to plan can be substantial.

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Tips from Don, Sr. - "The Rule of 72"

"Since my earliest recollections as a three year old, my father has been collecting clippings and factoids in cataloged three-ring binders."

- Don West, Jr.

Tips from Don, Sr.
Tip No. 1 - "The Rule of 72"

Since this is the first post that I have mentioned my father, Donald Louis West, I., I thought it appropriate to give just a brief background of my role model number numero uno, HERE.

My Dad is what you would call a "walking talking wikipedia", for my readers that are not online, wikipedia is the Web 2.0 online encyclopedia that has replaced the traditional printed volumes due to its limitless capacity to catalog our fascinating and globally connected world. (You can read my post on Why I love Wikipedia HERE). So, back to my Dad... Dad always seeks to have one jewel or gem of extremely useful knowledge to share with you whenever you enter his presence. I say it that way because for the past 17 years I have lived away from home, so when I return for a visit my Dad has prepared a ritual that dates back to my days on active duty in the US Navy back in the early nineties.

My Dad's ritual is quite simple, it begins with an invitation to sit down for a movie - always a hand picked title, kinda like the best of since you were last here, or the most relevant. Then typically in a different conversation there is the page from one of the binders. Since I was a young child my father has collected tens of thousands of newspaper and magazine clippings, of various sizes and shapes and catalogs them scrapbook style, (see picture above). Now it are the pages from the binders that I have come to love. Why, you ask. Simply because it always starts with, are you familiar with...x,y,z. An no matter how hard you prepared during your journey, no matter how much you've read, you know the next words and the clippings on those pages are going to be way beyond the scope of your current radar capacity. (I have already set Dad's blog up for him HERE, but we will have to wait to see if he will ever join and begin to digitize his binder knowledge.)

The "Rule of 72" was one of the early pearls of wisdom shared by my Dad. So now, I share it with you....

The "Rule of 72"

[72 ÷ Interest Rate = Est. Time to Double $]

Most are familiar with the concept of compound interest. So the "Rule of 72" is a simple way to roughly estimate how long it will take to double your money at a given interest rate. For example, let's say you have an opportunity to earn 8% interest on your money. To use the rule of seventy-two to determine how long it would take to double your money at 8% interest you would dived the number 72 by 8:

[72 ÷ 8 = 9 Years ]

If you are really into the math, check out the Rule's Wikipedia page HERE

You can also apply the Rule of 114 to estimate tripling your money, and the Rule of 144 for quadruapling.

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